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Nanosphere Q3 Revenues Plunge 49 Percent on End of Service Contracts

By a GenomeWeb staff reporter

NEW YORK (GenomeWeb News) – Nanosphere took a 49 percent hit in its third quarter revenues year over year, the company reported after the close of the market on Wednesday.

For the three months ended Sept. 30, the company recorded revenues of $373,437, compared to $729,017 a year ago, short of Wall Street expectations, which had estimated $670,000 in revenues.

Year-ago figures included $400,000 in service revenues related primarily to assay development contracts that have been completed, Nanosphere said in a statement.

Product sales increased 11 percent to $341,547 from $306, 717 in the third quarter of 2009. Revenues from grants and contracts, however, shriveled to $31,890 from $422,300 a year ago, a 92 percent drop-off.

Nanosphere's net loss for the quarter widened to $10.9 million, or $0.39 per share, from $8.2 million, or $0.37 per share a year ago, and exceeded analyst estimates of a loss of $0.33 per share.

The company said that the increase in losses was driven by a $1.2 million increase in litigation expenses related to a patent dispute with Eppendorf, which had alleged Nanosphere infringed on a patent covering its Silverquant microarray technology. The case was settled in August.

Nanosphere also noted a $500,000 increase in non-cash stock compensation expense.

In a conference call after the release of its earnings, Nanosphere officials provided an update on the firm's molecular diagnostics pipeline.

Earlier in the year, the company withdrew a 510(k) submission with the US Food and Drug Administration for a cardiac troponin assay using a new predicate device. In the call, William Moffitt, CEO of Nanosphere, said the company is nearing completion of the migration process of the assay to its Verigene SP platform.

The original application was based on Beckman Coulter's AccuTnI assay, which ran into problems with a positive bias when run on Beckman's UniCel DxI Immunoassay Systems.

The company's fast-track clinical trial for the cardiac troponin assay is expected to finish the follow-up phase by the end of the year, and Nanosphere plans to use the fast-track samples to run the clinical trials in support of a new 510(k) submission, Moffitt said, adding he believes the trials can be started in early 2011.

Nanosphere also filed a PMA with the FDA during the third quarter for its 2C19 assay to guide treatment with Plavix, or clopidogrel. The FDA, Moffitt said, has granted expedited review status for the company's submission.

The company also has submitted a 510(k) application for clearance of its respiratory assay, which includes influenza A and B; respiratory syncytial virus A and B; and subtyping for H1, seasonal H3, and the 2009 H1N1 virus.

"Upon clearance, we are prepared to commence product shipment to the market this flu season," Moffitt said. "We expect this respiratory assay to be the only panel to include all of these targets in a single test and run on a sample-to-result platform."

On the call, Chief Marketing Officer Michael McGarrity added that Nanosphere is looking outside the US market to broaden the business. In Europe, there is "considerable interest" for the clopidogrel assays as well as warfarin assays, and the company has identified distributors.
"Pending CE mark, we will launch by country and plan to bring out three to four countries per quarter throughout 2011, selling into all of the largest markets by year end," he said.

In Asia-Pacific, Nanosphere has identified partners to guide it through the pre-market and regulatory process for clopidogrel metabolism and respiratory testing, "paving the way to launch later in 2011," McGarrity said.

The firm's R&D costs for the quarter rose to $4.9 million from $4.6 million a year ago as clinical trial materials increased, Nanosphere said. SG&A expenses increased to $5.3 million from $3.5 million a year ago due mainly to its litigation with Eppendorf and an increase in non-cash stock compensation expense.

As of Sept. 30, Nanosphere said it had $45.6 million in cash and cash equivalents.

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